HCA's 'trauma response' fee is symptom of broken system

Mar. 11, 2014

Written by

Shelley DuBois

TriStar Centennial Medical Center is one of the HCA facilities in Tennessee.

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Nashville hospital giant HCA charges dramatically more for trauma care at its Florida facilities than other Florida hospitals do, according to a recent investigation by the Tampa Bay Times. Part of the company’s controversial strategy involves charging an exorbitant “trauma response” fee, the investigation found.

“The overcharging starts the moment patients arrive,” the story says, adding that the trauma response fee can be as high as $33,000 in some cases. The average trauma response fee for other hospitals in the state is $6,754, the Times reported.

The story illustrates one example of a broken system. As it stands, what a hospital charges, or its list price for procedures, is very different from what treatment costs the hospital, which in turn can be different from the bill patient receives.

“Charges are an artifact required from a regulatory standpoint and are rarely what a patient or payer pays,” said Ed Fishbough, an HCA spokesman. “HCA provides uninsured patients a discount similar to that provided to commercial insurance companies, and those who qualify under our charity care policy pay nothing. Therefore, what patients pay has more to do with whether they are covered by a government program, the type of insurance they have, or if they receive an uninsured or charity discount than it does with charges.”

Hospitals negotiate reimbursement rates with insurance companies behind closed doors. The vast majority of the reimbursement rates have been negotiated on a fee-for-service basis, meaning hospitals make more money by providing more services, regardless of patient outcomes. This is one of the issues that the Affordable Care Act, with all its flaws, was intended to address.

Trauma care has an added twist. Trauma units usually lose money because many patients who wind up in the trauma unit are uninsured and cannot pay for care. Hospitals know this, so they negotiate reimbursement rates for procedures knowing that they’ll see the money in only some cases, which can result in an inflated rate for the patients who do pay.

Though they tend to lose money, trauma units require quick response times and top-tier caretakers, which give a hospital prestige. They are also expensive, so not every hospital can afford to run one, and insurers must include some facility with a trauma center or a burn unit in their plans. That means hospitals with a trauma unit have tremendous bargaining power when discussing reimbursement rates with insurers.

In Florida, HCA found a way to use this trauma dynamic to its advantage. In that state, government officials approved a “trauma response” fee — the cost of gearing up trauma unit staff to respond to an emergency. According to the Times story, HCA negotiated with Florida Blue, BlueCross BlueShield’s Florida plan, so the insurance company would pay a percentage of the trauma fee.

That gives the company an incentive to try to push that fee as high as Florida Blue will allow.

“Insurance plans negotiate their payments with providers at arm’s length and reach commercially negotiated rates to which the parties agree,” Fishbough said. “Otherwise there is no contract.”

None of that is illegal. “I don’t know of a hospital in the country that isn’t looking at ways to optimize net collected revenues for their clinical programs,” said Paul Keckley, a Nashville health care analyst.

“There is this whole notion of health care being able to operate in the consumer market where you choose based on some understanding of what your options are, and you have some visibility as to the features and the benefits and the price. We’re so far from that in health care, it’s crazy.”

Issue corrected

Despite the general discrepancy between charges and patient bills, the Times report found patients who received bills that seem very high.

In the story, HCA officials admitted to double-billing some patients whom theTimes asked about, and said the company had corrected the issue. The story also said Florida Blue renegotiated its trauma fee payment agreement with HCA.

Payers and hospitals negotiate insane rates all the time. What would be a legal problem is a hospital that categorized certain injuries as trauma that did not qualify. To figure out if that was happening, a clinical expert would need to review a hospital’s records and determine whether all of the patients charged a trauma response fee met the criteria for trauma patients.

Hopefully, in the future, there will be fewer middlemen between the care people receive and the bills they get in the mail. To streamline the system, hospital companies must have financial incentives that line up with high-quality, cost-effective care.

“Nashville learns to operate within the swim lanes of payments,” Keckley. “It’s a great market for figuring out how to make money. Whatever those legal swim lanes are, (hospital companies will) do really well and they’ll operate really efficiently.”

Reach Shelley DuBois at 615-259-8241 and on Twitter at @shelleydubois.